If you and your spouse are getting divorced, you may wonder how to officially divide retirement benefits. A qualified domestic relations order recognizes another payee’s right to receive all or a portion of the benefits from a pension or a qualifying retirement plan.
The U.S. Department of Labor states that only a state authority, like a court, can approve a property settlement before finalizing a QDRO. Although a QDRO may be beneficial in your divorce, this is not a requirement for finalizing the dissolution of your marriage if you and your spouse have retirement funds to divide.
How a QDRO works
Every benefits administrator will have different requirements for handling QDROs, but these documents must still contain certain information. For example, your QDRO should have the name and mailing address of the plan participant and the alternate payee, the name of every plan divisible under the QDRO, and the percentage of the plan’s assets allocated to the alternate payee. This document should also outline the number and the time period of the payments following the divorce.
Types of distributions
If you are the alternative payee of the QDRO, you have several options for how you obtain your portion of the distribution. For example, you can take the money as a lump sum or as an annuity, receiving the funds in installments.
When dividing assets through a QDRO, there is no set approach for every divorce. Factors that can impact your QDRO include the type of retirement accounts you have, the type of benefits provided, and the reasons behind the division of the accounts.